This article was originally published in Transaction Advisors.
Activist investing continues to explode, with the target of such investments getting larger and more diverse. Few, if any, management teams are immune to an activist challenge in today's market.
Activist investors may now control close to 8% of total hedge fund capital with 70% of engagements coming in the consumer goods, financial services, technology, industrials, and materials industries.
Management teams face a dilemma when confronted with an activist. Activists' overall track record indicates an ability to create shareholder value, but often at a high cost for the organization. Moreover, much of the increased value is front-loaded.
Regardless of the activist investor's ultimate thesis, most will lead off with a demand for changes in corporate governance. A minority of activists have no publicly stated objective beyond that.